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Review + Reflection from a Social Business of a different sort (Pt. 2 of 2)

May 19, 2008

Jeff Delkin, co-founder, bambu

It’s our belief, that we have a responsibility to ‘give back’ to the planet and to the communities where we operate. It has always been central to who we are. We wanted to recognize and benefit the communities in which we work and live. And that place is China. While we may not be a social business as Yunus describes, we do provide support and volunteer services to the work of Grameen Foundation in China. We do donate over 1% of our total sales (not just profits) to non-profit organizations preserving and restoring the natural environment in China and around the world. We do donate to the local schools where the children of many our or craftspeople attend.

We are not a social business in the strictest sense of the word. We are a for profit company that strives to do good. And as such, I am not convinced that the social business model that Yunus describes is the best model.

Yunus argues that businesses with a social responsible strategy will have too often forego their good corporate citizenship for profit motives. And unfortunately, too often this does happen. But it happens to organizations which have not integrated their principles firmly into their business.

Our own business reflects more the ‘Compassionate Capitalism’ model. Yunus supports globalization and believes it brings more benefits than its alternative. He also recognizes the importance of marketing by conducting product testing, naming and identity development, and a tiered pricing strategy. Given that, businesses that practice compassionate capitalism can benefit many.

I have been interested in the relationship between poor countries and poor environmental records. Why must developing countries sacrifice their natural resources for the sake of development and progress? Why can’t countries learn to make different decisions than countries before them without threatening the environment? More directly, can poor countries afford to be Green?

China, it’s frequently forgotten, is a poor country. Figures we’ve seen from the Grameen Foundation put the number of people in China living below a dollar a day is over 50 million people. But unfortunately, fast-emerging economies inevitably leaves great swaths of people behind.

A Yale University study concludes that as poor countries become richer, they invest more heavily in environmental improvements. No real surprise here, but what is interesting is, while economics is key, good governance is essential. Everyone will gain if poor countries find a way to leapfrog over the phases of development which in so many places do terrible harm to the environment, and policy, regulation and proper stewardship are crucial.

In thinking about social business models, I was recently introduced to NextBillion.net. NextBillion.net is a website and blog about how business drives positive social and environmental change in low-income communities. Its serves as a discussion forum, networking space and knowledge base for individuals and organizations interested in the "next billion" – the next billion people to rise from the base of the economic pyramid (BOP), and the next billion in profits for businesses that strive to fill market gaps by integrating the BOP into healthy economies.

Their goal is to promote the development and implementation of business strategies that open opportunities and improve quality of life for the world’s 4 billion low-income producers and consumers. That’s the kind of big audacious goal we get excited about.

There is more than one way for business to benefit poor individuals. Social businesses as defined by Yunus is one such model. I would like to believe there are others.

While not directly providing a product that appeals to the poor, our model is one that works for us and works for many. And ‘the many’ is important and integral to what we’re about.

Businesses that benefit for the less fortunate, and help make the world a better and more humane place are a leap in the right direction. And we are optimistic that we will see more businesses operating with this kind of compassion and integrity.

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Hi Jeff,

This is another Jeff with another social business of a different sort, which advocates for a business model which invests in community/social purpose and uses its own revenue from software development to fund advocacy in Eastern Europe.

We produce strategy documents to promote the social investment paradigm and were able to leverage investment in the setting up of a micro-finance bank in Siberia, about 8 years ago.

We've since been engaged in Ukraine, attempting to leverage something along the same lines at a national level. All described in my link

Briefly the model proposes that social investors, like governments, purchase the expensive, long-term assets, like land, and let entrepreneurs run businesses using the assets. The exact terms of use would be negotiated on a case-by-case basis.

The idea is rooted in the fact that the entrepreneur cannot reap the social benefits of their enterprise. We do not have a good system that recognizes anything but the financial returns of an enterprise. By having a social investor in the enterprise, THEY would get their return from the social benefits while the entrepreneur would get the financial benefits from the enterprise.

Having a cooperative enterprise between the entrepreneur and a social investor provides a better way to get a return that integrates social, environmental, and financial benefits. When the social investor owns the long-term assets, the communities benefits can be managed and assessed according the the needs of the social investment models. An entrepreneur can then run an enterprise using free market mechanisms that are dynamic and efficient but without the overhead that drains an enterprise of the working capital that more directly benefits a local market.

This is a very simple model with a huge potential to bring social returns by separating the financial returns required by a business investor from the external returns required by a social investor.

A sure and specific way to ensure this social commitment can come from
not only the government sources, which are already burdended with economic problems, a special duty ( on net bonus announced by each public limited company) should be deducted from the source and spent on the projects.